Recognition and enforcement of foreign judgments in Russia

October 2014 | SPECIAL REPORT: INTERNATIONAL DISPUTE RESOLUTION

Financier Worldwide Magazine

October 2014 Issue

Integration of the Russian Federation into the global economy resulted in a dramatic increase in the number of disputes involving Russia-related parties. As a consequence, Russian courts frequently deal with recognition and enforcement of foreign judgments and other types of judicial decrees. However, recognition and enforcement of foreign judgments has become a source of heated debate for Russian academics and practitioners due to serious contradictions existing in Russian law on this matter.

The Russian Court system is made up of two branches – commercial courts (arbitrazhnye sudy) hearing the commercial disputes and courts of general jurisdiction (sudy obschey juririsdictii) hearing all other types of disputes – civil, family and criminal matters. Due to this division, the commercial courts have jurisdiction over recognition and enforcement of foreign judgments on commercial matters whereas the courts of general jurisdiction are competent to rule on matters regarding recognition and enforcement of foreign judgments on civil and family matters.

The proceedings in each branch are governed by a separate code: the Code of Civil Procedure (CCP) for the courts of general jurisdiction and Arbitrazh Procedural Code (APC) for commercial courts. CCP and APC provide for different grounds for the recognition of foreign judgments.

Under Art. 409 CCP, a foreign judgment may be recognised and enforced in Russia if an international treaty with the country of origin of the judgment specifically provides for such recognition. In the absence of the relevant treaty, enforcement will not be granted unless the judgment falls under an exception established by Art. 415 CCP, which provides that foreign judgments on personal status and dissolution of marriage have immediate effect in Russia and do not require further recognition by Russian courts.

In turn, the APC sets out different grounds for the recognition and enforcement of foreign judgments. Under Art. 241 of the APC, a foreign judgment is subject to recognition and enforcement in Russia if an international treaty or federal law specifically provides for such recognition.

The only federal law providing for recognition and enforcement of foreign judgments is the Federal Law ‘On insolvency (bankruptcy)’ which sets forth that judgments of foreign courts on bankruptcy matters are recognised under the reciprocity principle (Art. 6). In other words a foreign judgment on a bankruptcy matter will be recognised and enforced in Russia if the courts of the country of origin of the judgment will enforce the similar judgment of the Russian court.

The analysis of the relevant provisions of the CCP and the APC could lead the court to conclude that, in the absence of a relevant treaty between the court of the country of origin of the judgment and the Russian Federation, the foreign judgment may not be recognised and enforced in the Russian Federation. However, the majority of Russian courts (both courts of general jurisdiction and commercial courts) apply the doctrine of international comity. Under this doctrine the principle of international law (comity of nations) imposes an obligation on the Russian Federation to take due regard of the acts of foreign nations and thus recognise and enforce foreign judgments even in the absence of a treaty between the country of the origin of the judgment and Russia. Due to the fact that the principles on international law have immediate effect in Russia (Art. 15 Constitution of Russian Federation), this principle prevails over the specific provision both of the CCP and the APC stating otherwise.

The principle of international comity is mainly applied by the commercial courts of the Russian Federation. Under the said principle, the commercial courts recognised the judgments of English, Dutch and German courts in the absence of the specific treaty between the Russian Federation and these countries. However, the courts of the general jurisdiction are more hesitant to apply the international comity principle as in their belief the existence of the international comity principle is doubtful. For this reason, the application of the principle of international comity remains a source of constant dispute between academics and practitioners.

Both the CCP and the APC are clear on the matter that only final judgments of the foreign courts are subject to recognition and enforcement in the Russian Federation. This conclusion is supported by the fact that the Russian court may decline recognition of foreign judgment if the judgment has not become final (i.e., is not subject to appeal) under the law of the country of its origin (Art. 412.1 CCP and Art. 244.1 APC).

For this reason, all other foreign court’s acts – including injunctions, attachments and any types of interim measures – are not subject to recognition and enforcement in Russia and thus have no legal effect whatsoever. For this reason, any party to a foreign proceeding that needs to attach a defendant’s assets in the Russian Federation must solicit the relevant interim measure from a Russian court (Art. 139 CPC and Art. 90.3 APC).

The CPC and the APC set out almost identical grounds to deny recognition and enforcement of foreign judgment in the Russian Federation, as follows: (i) the judgment has not become final under the law of the country of its origin; (ii) the judgment was given in default of appearance and the party was not properly and timely served with process in order to arrange its defence; (iii) the matter falls within the exclusive jurisdiction of the Russian courts under the international treaty and/or federal law; (iv) a judgment on the same cause of actions was rendered by the Russian Court and the said judgment of the Russian court came into effect; (v) a case with similar subject matter and between the same parties to the dispute is pending with the Russian courts; (vi) the time limit (three years) for enforcement of the foreign judgment lapsed and was not extended by the Russian court; or (vii) the enforcement of the foreign judgment would violate the ordre public of the Russian Federation (general principles of law of the Russian Federation).

With regard to the violation of Russian ordre public as a ground to deny recognition and enforcement of a foreign judgment, it is important to mention that its application was clarified in the Informational Letter of the Supreme Commercial Court of the Russian Federation No. 156. In this Informational Letter, the Supreme Commercial Court specifically clarified that ordre public provision of the Arbitrazh Procedure Code shall be applied as an exceptional remedy available to Russian courts only in situations where the foreign judgment produces an effect totally incompatible with the fundamentals of Russian law.

The aim of the Informational Letter was to limit the application of the ordre public clause which was frequently applied by Russian Courts in situations where the foreign court applied concepts unfamiliar to Russian law, but causing no harm to Russian sovereignty.

Alexander Kostin is a lawyer at Khrenov & Partners. He can be contacted on +7 (495) 927 0707 or by email: a.kostin@yklaw.ru.